[Federal Register Volume 79, Number 156 (Wednesday, August 13, 2014)]
[Notices]
[Pages 47485-47487]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-19098]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72790; File No. SR-NYSEMKT-2014-66]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Amex
Options Fee Schedule in a Number of Different Ways
August 7, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on August 1, 2014, NYSE MKT LLC (the ``Exchange'' or ``NYSE
MKT'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to to amend the NYSE Amex Options Fee
Schedule (``Fee Schedule'') in a number of different ways. The proposed
changes will be operative on August 1, 2014. The text of the proposed
rule change is available on the Exchange's Web site at www.nyse.com, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule in a number of
different ways as described below. The proposed changes will be
operative on August 1, 2014.
First, the Exchange proposes to increase fees for Firm Proprietary
\4\ electronic transactions in Penny Pilot issues. Specifically, the
Exchange is proposing a fee of $0.34 per contract (increased from $0.32
per contract) for electronic Firm Proprietary transactions in Penny
Pilot issues.
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\4\ ``Firm Proprietary'' transactions refer to trades the Firm
is entering into on a proprietary basis as opposed to trades entered
into in order to facilitate the activity of one of Firm's customers,
which is referred to as a ``Firm Facilitation'' trade on the NYSE
Amex Options Fee Schedule. Throughout this filing, the Exchange's
reference to Firm or Firms shall mean transactions the Firm is
executing electronically on a proprietary basis.
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Separately, the Exchange is proposing a fee of $0.44 per contract
charged to Broker Dealers, Professional Customers, and Non NYSE Amex
Options Market Makers that electronically transact in Penny Pilot
issues. Currently, Broker Dealers, and Professional Customers pay
[[Page 47486]]
$0.32 per contract, and Non NYSE Amex Options Market Makers pay $0.43
per contract, for electronic transactions in Penny Pilot issues.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \5\ of the Act, in general, and
Section 6(b)(4) and (5) \6\ of the Act, in particular, in that it is
designed to provide for the equitable allocation of reasonable dues,
fees, and other charges among its members and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers, or dealers.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposal to increase fees for
electronic transactions in Penny Pilot issues for Firms, Broker
Dealers, Professional Customers, and Non NYSE Amex Options Market
Makers is reasonable, equitable and not unfairly discriminatory for the
following reasons. First, the Exchange notes that the proposed per
contract fee of $0.44 for electronic Broker Dealers, Professional
Customers, and Non NYSE Amex Options Market Makers and $0.34 for Firm
Proprietary transactions, are both within the range of fees charged by
other exchanges for Broker Dealers, Professional Customers, Non NYSE
Amex Options Market Makers and Firms that electronically transact in
Penny Pilot issues.\7\
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\7\ See NASDAQ OMX PHLX (``PHLX'') fee schedule, as of July 23,
2014, located here: http://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing. PHLX charges Professionals, Broker
Dealers, and Firms $0.48 per contract to transact electronically in
Penny Pilot issues. See also the Nasdaq Options Market (``NOM'') fee
schedule located here: http://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing. NOM charges $0.49 per contract in
Penny Pilot issues for Professionals, Broker Dealers, Firms and Non
NOM Market Makers that take liquidity.
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In addition, the Exchange notes that NYSE Amex Options Market
Makers are subject to other fees that are either higher than those
charged to--or not at all charged to--Broker Dealers, Professional
Customers, Non NYSE Amex Options Market Makers and Firms, such as ATP
Permit fees and Rights Fees.\8\ For example, in order to transact
electronically on the Exchange, a NYSE Amex Options Market Maker is
required to have at least one options trading permit (``ATP'') that
allows it to quote sixty issues, plus the bottom 45% of issues traded
on the Exchange by volume. The cost of one ATP is $8,000 per month. A
NYSE Amex Options Market Maker that wishes to transact electronically
in all issues on the Exchange is required to have five ATPs, at a
monthly cost of $26,000. By comparison, in order to transact
electronically on the Exchange, Broker Dealers, Professional Customers,
Non NYSE Amex Options Market Makers and Firms are only required to have
a single ATP, at a monthly cost of $1,000.\9\ The Exchange notes the
monthly cost differential of $7,000 to $25,000 in ATP fees paid by NYSE
Amex Options Market Makers, while Broker Dealers, Professional
Customers, Non NYSE Amex Options Market Makers and Firms incur no such
cost. Further, the Exchange notes that a large subset of NYSE Amex
Options Market Makers (Specialists, e-Specialists and Directed Order
Market Makers) also incur monthly Rights Fees, which are not charged to
Broker Dealers, Professional Customers, Non NYSE Amex Options Market
Makers and Firms. Therefore, while the NYSE Amex Options Markets Makers
may be charged a lower per contract rate than the rate proposed for
Broker Dealers, Professional Customers, Non NYSE Amex Options Market
Makers and Firms transacting electronically in Penny Pilot issues, when
all costs to these participants are considered, the cost differential
is much less. Thus, the Exchange believes that charging non-NYSE Amex
Market Makers a higher rate to transact electronically in Penny Pilot
issues is equitable and reasonable and not unfairly discriminatory vis-
[agrave]-vis NYSE Amex Market Makers because the higher rate is
designed to reflect the costs to the Exchange in supporting trading in
Penny Pilot issues.\10\
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\8\ See NYSE Amex Options Fee Schedule dated August 1, 2014
located here: https://www.nyse.com/publicdocs/nyse/markets/amex-options/NYSE_Amex_Options_Fee_Schedule.pdf.
\9\ Of the participants in question, only Firms are members of
the Exchange that are billed directly for any ATPs they own. All of
the other participants conduct business through an Exchange member
that is only required to have a single ATP for all business that
flows through them. For example, an Order Flow Provider with a
single ATP may route electronic orders to the Exchange on behalf of
Broker Dealers, Professional Customers and Non NYSE Amex Options
Market Makers.
\10\ The Exchange notes that this higher rate is still below the
rate charged to an NYSE Amex Options Market Maker--Non Directed that
electronically trades with a Customer, which rate would be $0.45,
comprised of a $0.20 transaction fee plus a $0.25 marketing charge.
See supra n. 8.
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As noted above, for electronic transactions in Penny Pilot issues,
the Exchange proposes to charge $0.34 to Firms and $0.44 to Broker
Dealers, Professional Customers, and Non NYSE Amex Options Market
Makers. The Exchange believes that the per contract differential
between these market participants is reasonable, equitable and not
unfairly discriminatory because, among other reasons (discussed below),
the rate differential falls within the range that already exists in the
industry. For example, Clearing Trading Permit Holder Proprietary (the
equivalent of a Firm Proprietary transaction on NYSE Amex) electronic
transactions on the Chicago Board Options Exchange (``CBOE'') are
charged $0.35 per contract in Penny Pilot issues, while Professionals,
Voluntary Professionals, JBO Participants, Broker Dealers and Non-
Trading Permit Holder Market Makers on the CBOE are charged $0.45 per
contract for electronic transactions in Penny Pilot issues.\11\ Thus,
the Exchange believes that imposing a fee differential similar to one
in existence on a competing exchange--on similar market participants,
for the same types of transactions--is likewise reasonable, equitable
and not unfairly discriminatory. Further, the Exchange notes that the
Miami International Securities Exchange LLC (``MIAX'') recently adopted
a monthly Firm fee cap for electronic Firm transactions.\12\ In
adopting the monthly Firm fee cap, which applied solely to Firms, MIAX
stated:
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\11\ See the CBOE fee schedule as of, July 1, 2014, located
here: http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf.
\12\ See Securities and Exchange Release No. 72583 (SR-MIAX-
2014-37) (July 10, 2014), 79 FR 41612 (July 16, 2014).
Providing a fee cap for Firms and not for other types of
transactions is not unfairly discriminatory, because it is intended
as a competitive response to create an additional incentive for
Firms to send order flow to the Exchange in a manner consistent with
other exchanges. Firms that value such incentives will have another
venue to send their order flow. To the extent that there is
additional competitive burden on non-Firm Members, the Exchange
believes that this is appropriate because the proposal should incent
Members to direct additional order flow to the Exchange and thus
provide additional liquidity that enhances the quality of its
markets and increases the volume of contracts traded here. To the
extent that this purpose is achieved, all the Exchange's market
participants should benefit from the improved market liquidity.
Enhanced market quality and increased transaction volume that
results from the anticipated increase in order flow directed to the
Exchange will benefit all market participants and improve
competition on the Exchange.\13\
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\13\ Id., 79 FR at 41613.
Similar to the reasons articulated by MIAX, the Exchange also
believes the proposed fee change is not unfairly discriminatory as it
is designed to attract order flow to the Exchange in a manner
consistent with other exchanges, which will, in turn, increase
[[Page 47487]]
liquidity and enhance the quality of the market to the benefit of the
investing public. For the forgoing reasons, the Exchange believes that
the proposal to charge $0.44 per contract to Broker Dealers,
Professional Customers, Non NYSE Amex Options Market Makers and $0.34
to Firms for electronic tractions in Penny Pilot issues is reasonable,
equitable and not unfairly discriminatory. The Exchange believes that
the proposed fees are also reasonable, equitable and not unfairly
discriminatory because the proposed fee changes will apply equally to
all Broker Dealers, Professional Customers, Non NYSE Amex Options
Market Makers and Firms electronically executed volumes in Penny Pilot
issues on the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes the
proposed fee change is reasonably designed to be fair and equitable,
and therefore, will not unduly burden any particular group of market
participants trading on the Exchange vis-[agrave]-vis another group
(i.e., Market Markers versus non-Market Makers or Firms versus non-
Firms). Specifically, the Exchange believes that Broker Dealers,
Professional Customers, Non NYSE Amex Options Market Makers and Firms
that are not subject to the additional dues and fees of NYSE Amex
Options Market Makers, will not be unduly burdened by the increased
transaction fee. Moreover, with respect to the fee differential between
Firms versus Broker Dealers, Professional Customers, Non NYSE Amex
Options Market Makers, the proposed fees are lower than the range of
similar transaction fees found on other options exchanges; therefore,
the Exchange believes the proposal is consistent with robust
competition by increasing the intermarket competition for order flow
from Firms. To the extent that there is additional competitive burden
on non-Firm ATP Holders, the Exchange believes that this is appropriate
because the proposal should incent ATP Holders to direct additional
order flow to the Exchange and thus provide additional liquidity that
enhances the quality of its markets and increases the volume of
contracts traded here, which, in turn, benefits the investing public.
In addition, the Exchange believes that the proposed changes will
enhance the competiveness of the Exchange relative to other exchanges.
The Exchange notes that it operates in a highly competitive market in
which market participants can readily favor competing venues if they
deem fee levels at a particular venue to be excessive. In such an
environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges and to attract order flow. For the reasons described above,
the Exchange believes that the proposed rule change reflects this
competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \14\ of the Act and subparagraph (f)(2) of Rule
19b-4 \15\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEMKT-2014-66 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2014-66. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2014-66, and should
be submitted on or before September 3, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-19098 Filed 8-12-14; 8:45 am]
BILLING CODE 8011-01-P